Debt Investment: A savior in uncertain times

In uncertain times everyone takes comfort with their best friends. Similar is the case with the investor community. Whenever market volatility increases, inflation raises its head, interest rates are rising and there is fear of economic down turn, focus of investors shift from capital appreciation to capital preservation. This is the time investors remember the old and trusted buddy

"Debt Investment", whom they normally forget in good times. In this article we will try to understand why this instrument acts as a savior and find out the reason why it takes the back seat when the investor community is in a positive mood. We will also try to figure out when the right time to invest in debt instruments is and what are the options available with us.

Debt Instrument

A debt instrument is an asset that pays fixed returns over time. It has a fixed maturity period after that the investors can liquidate the asset and gets the principal with the remaining interest dues.

Debts are low risk, low return assets. The liquidity is low to medium.
There are many debt types available to investors to choose from.

a. Fixed Deposits
b. Debt Mutual Funds
c. Bonds and Debentures
d. Government managed saving schemes (NSC, KVP, PPF)

Debt Instrument � Savior in the time of market uncertainty

Whenever there is doubt regarding the economic growth, inflation is high, and interest rate is rising due to monetary tightening, equity valuation goes down as the expected returns from equity investment goes up in a increasing interest rate scenario and return from debt instruments becomes lucrative. As the interest rate is rising, so is the return from the debt instrument. Due to risk aversion investors with a low risk appetite prefer to invest in debt instruments. High risk appetite investors also get into capital preservation mode and reallocate funds towards debt instruments.

The best time to park your money in a debt instrument is at the peak of the interest rate cycle. We all know inflation is increasing day by day and RBI is trying to tame it by monetary tightening. The interest rates have been going up slowly since the last one year as the RBI is tightening the monetary policy. We have seen that RBI has increased interest rates 11 times in last 2 years.

There is also uncertainty about RBI�s next move when they meet in this month (September, 2011). It�s expected that RBI will increase rates further as till now it has not been able to contain inflation. Based on this assumption we will be somewhere near the peak interest rate scenario around November. So investors should start planning for investment as the risk reward ratio is going to be in favor of investors in another two months.

Choices available for investors

Despite low risk low return nature of debt investment, debts within their own set vary in risk and return. Government securities and bank deposits are almost risk free (let�s ignore inflation and interest rate risk) while corporate debts are riskier. Let�s take a look at the choices available to investors.
For investors with low risk appetite and long term investment horizon

As per new DTC which is expected to be implemented from April 2012, PPF investments will continue to be governed by EEE (Exempt, Exempt, Exempt) and not EET (Exempt, Exempt, Taxable) meaning investment, accumulation and withdrawal - all three related to this investment will be tax exempt. So investment in PPF is recommended if DTC implements this rule from 2012. Investment in PPF also acts as a tax saving instrument which adds to the overall return on investment. Government securities and schemes are other options for risk-averse investors.

For investors with moderate risk appetite and short term investment horizon
Investment in Debt Funds and FD is a good option for investors with short to medium term investment horizon. Debt funds invest in various types of debt securities and are professionally managed. Most of the debt funds are highly liquid so money can be parked in them for a short term. Once the economic condition improves and interest rate eases, this money can be reallocated to equity portfolio. If you as an investor simply want to sit and enjoy life till normalcy in market returns then medium term FD can be a very good option for you as the return on them is attractive too.   

Direct Tax Code (DTC)

The direct tax code is expected to take out various debt instruments available to investors for tax saving purpose. Investment in Government managed saving schemes (NSC etc.) and infrastructure bonds for tax saving purpose are a strict no for the time being as upcoming DTC proposes to remove them from the categories of exempted income. Investors should wait for the clarity in DTC before they invest in them for tax saving purposes.

Content partner:

BankBazaar.com is an online marketplace where you can instantly get the lowest loan rates , compare and apply online for your personal loan , home loan , car loan and credit card from India's leading banks and NBFCs.

 

Conoco to Farm-out in Kashagan - Analyst Blog

Texas-based ConocoPhillips (COP) has validated that it is on the receiving end of a formal notification by the Kazakhstan Ministry of Oil and Gas. The Ministry is exercising its right under the Subsoil Law of Kazakhstan to pre-empt ConocoPhillips' proposed sale of its 8.4% interest in the North Caspian Sea Production Sharing Agreement (Kashagan) to ONGC Videsh Limited. As part of such notice, the Ministry of Oil and Gas has nominated KazMunayGas (KMG) as the body that will obtain ConocoPhillips' interest in Kashagan. The asset is located in the Kazakhstan sector of the Caspian Sea. Under the pre-emption, the proceeds received by ConocoPhillips will remain unchanged at about $5 billion, including customary adjustments. Subsequently, KMG will proceed on finalizing all essential approvals, which will include a consent from the Kazakhstan Anti-Monopoly Agency. The transaction is likely to conclude in the fourth quarter of 2013. The latest sale of the company's interest in Kashagan forms part of ConocoPhillips' strategy to enhance shareholder value through portfolio optimization as well as focused capital investments. These will likely lead to growth in production and cash margins, superior returns on capital and a compelling dividend. ConocoPhillips remains on track with its divestment program, with a total of over $12 billion completed. The company has generated $1.1 billion in proceeds from asset sales during the quarter and expects to raise an additional $8.5 billion from the disposition program by the end of 2013. In this regard, ConocoPhillips is trying to shed part of the Surmont and APLNG projects this year. This would enable ConocoPhillips to generate a healthy cash surplus in 2013. ConocoPhillips carries a Zacks Rank #3 (Hold). However, Zacks Ranked #1 (Strong Buy) stocks – PetroQuest Energy Inc. (PQ), Ocean Rig UDW Inc. (ORIG) and Hornbech Offshore Services, Inc. (HOS) – are expected to perform impressively over the short term.

Zillow Inc (Z) Q3 Earnings Preview: Another Huge Surprise In The House?

Zillow, Inc. (Z) will host a conference call to discuss its third quarter 2013 financial results on Tuesday, November 5, 2013 at 2 p.m. Pacific Time (5 p.m. Eastern Time), following the release of the company's quarterly financial results. Zillow® CEO Spencer Rascoff and CFO Chad Cohen will host the webcast.

Wall Street anticipates that the internet service provider will lose $0.08 per share for the quarter. iStock expects Z to top Wall Street's consensus number. The iEstimate is a loss of $0.05.

Zillow engages in the operation of a real estate and home-related information marketplace on mobile and the Web in the United States. The company owns and operates Zillow.com; Zillow Mobile, a suite of home-related mobile applications; Zillow Mortgage marketplace, where borrowers connect with lenders to find loans and get mortgage rates; Zillow Digs, a home improvement marketplace for consumers to find visual inspiration and local cost estimates; and Zillow Rentals, a marketplace and suite of tools for rental professionals, Postlets, Solutions, Buyfolio, Mortech, and HotPads.

In its limited public life, Zillow has smoked past Wall Street's consensus seven of the last eight quarterly checkups. The average bullish surprise was 336.63% more than analysts' expectations. WOW. Profits fell short once by 10%, which was just a penny.

As you might expect, Zillow's earnings-driven price-performance mostly lines up with the direction of the surprise. Z's price gained ground in the three-day surrounding the new six of seven better than expected results. Meanwhile, one bullish surprise and the lone miss were greeted with boos and a backpedalling stock price.

The average gain for the half-dozen green reactions was 11.15% while the pair of red reactions averaged 20.65%. Based on this history, Zillow is likely to swing dramatically following Tuesday afternoon's announcement.

Picking the right side of the tape is the question. Let's see if we can find some clues using website traffic and! search trends, along with last quarter's 10-Q.

First up, the number of visitors to Zillow.com increased in Q3 versus Q2, according to Alexa.com and Quantcast.com. Both sites are unofficial numbers but are in agreement. Using Quantcast's traffic estimates, iStock calculates a 13.56% increase in traffic to Zillow.com during the third-quarter relative to the second quarter. Meanwhile, Alexa.com says page views were up 5.30% during the last three months.

Our traffic findings are confirmed by Google Trends. Quarter-over-quarter (QoQ) search volume intensity for the keyword "Zillow" increased by 9.56%. More visitors and more pageviews usually mean more revenue for websites. In Q2, Zillow turned a penny profit on versus expectations of a loss of 11 cents.

 

With the pieces in place to generate more revenue, it comes down to management controlling expense. In the second quarter's 10-Q, there were a number of references to higher expenses to help the business grow.

The key for iStock is a company's ability to keep costs and revenue increases/decreases in line. In other words, if sales are growing by 10%, we want to see costs increasing by no more than 10%. Of course, our preference would be for costs to climb at a slower rate or actually fall, but a one-for-one ratio is cool with us.

But, this in not the relationship iStock found in Q2's 10-Q. Total costs and expenses jumped 116% while revenue increased 69%. On the surface, the relationship looks bad; however, 100% of the difference comes from the sales and marketing line-item, which we see as more of an investment than a cost. If it is money well spent, it should translate into future business and a positive return on investment. Perhaps, evidence of it being money well-spent will show up in forward guidance.

Otherwise, all other costs increased at a similar pace as revenue growth.

Overall: The iEstimate, Zillow, Inc.'s (Z) EPS surprise history, Google and web traffic trends suggest Z will deliver another stron! g announc! ement after the market closes on Tuesday. Hopefully, for shareholders, the sales and marketing investment will begin to pay off with robust guidance.

Zillow Inc (Z) Q3 Earnings Preview: Another Huge Surprise In The House?

Zillow, Inc. (Z) will host a conference call to discuss its third quarter 2013 financial results on Tuesday, November 5, 2013 at 2 p.m. Pacific Time (5 p.m. Eastern Time), following the release of the company's quarterly financial results. Zillow® CEO Spencer Rascoff and CFO Chad Cohen will host the webcast.

Wall Street anticipates that the internet service provider will lose $0.08 per share for the quarter. iStock expects Z to top Wall Street's consensus number. The iEstimate is a loss of $0.05.

Zillow engages in the operation of a real estate and home-related information marketplace on mobile and the Web in the United States. The company owns and operates Zillow.com; Zillow Mobile, a suite of home-related mobile applications; Zillow Mortgage marketplace, where borrowers connect with lenders to find loans and get mortgage rates; Zillow Digs, a home improvement marketplace for consumers to find visual inspiration and local cost estimates; and Zillow Rentals, a marketplace and suite of tools for rental professionals, Postlets, Solutions, Buyfolio, Mortech, and HotPads.

In its limited public life, Zillow has smoked past Wall Street's consensus seven of the last eight quarterly checkups. The average bullish surprise was 336.63% more than analysts' expectations. WOW. Profits fell short once by 10%, which was just a penny.

As you might expect, Zillow's earnings-driven price-performance mostly lines up with the direction of the surprise. Z's price gained ground in the three-day surrounding the new six of seven better than expected results. Meanwhile, one bullish surprise and the lone miss were greeted with boos and a backpedalling stock price.

The average gain for the half-dozen green reactions was 11.15% while the pair of red reactions averaged 20.65%. Based on this history, Zillow is likely to swing dramatically following Tuesday afternoon's announcement.

Picking the right side of the tape is the question. Let's see if we can find some clues using website traffic and! search trends, along with last quarter's 10-Q.

First up, the number of visitors to Zillow.com increased in Q3 versus Q2, according to Alexa.com and Quantcast.com. Both sites are unofficial numbers but are in agreement. Using Quantcast's traffic estimates, iStock calculates a 13.56% increase in traffic to Zillow.com during the third-quarter relative to the second quarter. Meanwhile, Alexa.com says page views were up 5.30% during the last three months.

Our traffic findings are confirmed by Google Trends. Quarter-over-quarter (QoQ) search volume intensity for the keyword "Zillow" increased by 9.56%. More visitors and more pageviews usually mean more revenue for websites. In Q2, Zillow turned a penny profit on versus expectations of a loss of 11 cents.

 

With the pieces in place to generate more revenue, it comes down to management controlling expense. In the second quarter's 10-Q, there were a number of references to higher expenses to help the business grow.

The key for iStock is a company's ability to keep costs and revenue increases/decreases in line. In other words, if sales are growing by 10%, we want to see costs increasing by no more than 10%. Of course, our preference would be for costs to climb at a slower rate or actually fall, but a one-for-one ratio is cool with us.

But, this in not the relationship iStock found in Q2's 10-Q. Total costs and expenses jumped 116% while revenue increased 69%. On the surface, the relationship looks bad; however, 100% of the difference comes from the sales and marketing line-item, which we see as more of an investment than a cost. If it is money well spent, it should translate into future business and a positive return on investment. Perhaps, evidence of it being money well-spent will show up in forward guidance.

Otherwise, all other costs increased at a similar pace as revenue growth.

Overall: The iEstimate, Zillow, Inc.'s (Z) EPS surprise history, Google and web traffic trends suggest Z will deliver another stron! g announc! ement after the market closes on Tuesday. Hopefully, for shareholders, the sales and marketing investment will begin to pay off with robust guidance.

3 Tech Stocks That Ignored the Fed and Moved Higher

Lately, investors have been holding their breath trying to figure out what the Federal Reserve will do with its monetary-policy moves, especially the bond-buying quantitative easing program. Today's release of the June minutes of the Federal Open Market Committee meeting didn't really provide any concrete answers, though, as economic data remain open to different interpretations. In the end, investors won't be able to predict what the Fed will do before it takes action, and the nine-point drop in the Dow Jones Industrials (DJINDICES: ^DJI  ) seems to confirm that investors are looking beyond the immediate future and understanding the inevitability that at some point, quantitative easing will end.

But the Dow had some big movers on this quiet day, with three of its technology giants gaining 1% or more. Hewlett-Packard (NYSE: HPQ  ) led the Dow with a 1.8% gain after getting a favorable analyst upgrade. Yet this afternoon, Gartner reported a nearly 11% decline in worldwide PC shipments during the second quarter, further highlighting the steady erosion of what has been a traditional area of strength for HP. Lenovo recaptured the top spot in PC shipments from HP, but HP remains relatively strong in the U.S., Latin America, and the European/Middle Eastern/African market. The report doesn't change anything about HP's strategy though: it needs to move forward with initiatives to develop its non-PC businesses faster.

Microsoft (NASDAQ: MSFT  ) picked up 1% after announcing its CityNext program to help cities take advantage of their human capital and other resources to foster innovation. But the real news might come tomorrow, when many expect the company to provide more guidance about a possible restructuring. Watching Microsoft's corporate moves could shed some light on which areas the company sees as being highest priority in the years to come, as well as potentially creating a list of possible successors to CEO Steve Ballmer.

Finally, Cisco Systems (NASDAQ: CSCO  ) climbed 1%. The company has done a good job of increasing its presence in the cloud-computing space, with Cisco having been cited by an analyst firm as hurting the prospects of cloud rival VMware (NYSE: VMW  ) . As tech giants across the industry break out of their traditional niches and all chase after the same high-growth areas, such confrontations will become more commonplace, and it'll be essential for Cisco to use its size and financial strength to make the most of the opportunities it has.

Technology has become a hotspot for investing and innovation, but it's incredible to think just how much of our digital and technological lives are almost entirely shaped and molded by just a handful of companies. Find out who will win the war among the 5 biggest tech stocks in The Motley Fool's latest free report, which details the knock-down, drag-out battle being waged by the five kings of tech. Click here to keep reading.

Martha Stewart Agrees to Pay Cut

Martha Stewart and the company that bears her name, Martha Stewart Living Omnimedia (NYSE: MSO  ) , have agreed to amend her employment agreement signed in 2009, reducing Stewart's annual base salary by $200,000 to $1.8 million, according to a recent SEC filing. Stewart's lower annual salary became effective on July 1 and will remain in force until June 30, 2017.

In addition to the decline in annual salary, Stewart agreed to a lower payout as part of the Intangible Asset License Agreement, or IAA, entered into in June 2008. According to the SEC filing, Stewart will receive an annual payment of $1.7 million under the new IAA agreement, a reduction of $300,000. The lower IAA payment becomes effective on Sept. 15, the next scheduled annual payment. The new IAA will remain in effect until Sept. 15, 2017.

Martha Stewart Living Omnimedia said the amended employment agreement and IAA are "consistent with their plan to return Martha Stewart Living Omnimedia to profitability."